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What is a public sector pension worth?

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Author Info
Richard Disney () (Institute for Fiscal Studies and University of Nottingham)
Carl Emmerson () (Institute for Fiscal Studies)
Gemma Tetlow () (Institute for Fiscal Studies)
Abstract

We measure accruals in defined benefit (DB) pension plans for public and private sector workers in Britain, using typical differences in scheme rules and sector-specific lifetime age-earnings profiles by sex and educational group. We show not just that coverage by DB pension plans is greater in the public sector, but that median pension accruals as a % of salary are almost 5% higher among DB-covered public sector workers than covered private sector workers. This is largely driven by earlier normal pension (retirement) ages. For workers of different ages in the two sectors, marginal accruals also vary as a result of differences in earnings profiles across the sectors. The differences in earnings profiles across sectors should induce caution in using calculated coefficients on wages from cross sections of data in order to estimate sectoral wage effects.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W07/17.

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Date of creation: Oct 2007
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Handle: RePEc:ifs:ifsewp:07/17

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs

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References listed on IDEAS
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  1. Disney, Richard & Whitehouse, Edward, 1996. "What Are Occupational Pension Plan Entitlements Worth in Britain?," Economica, London School of Economics and Political Science, vol. 63(250), pages 213-38, May. [Downloadable!] (restricted)
  2. Stephen Nickell & Glenda Quintini, 2002. "The Consequences of The Decline in Public Sector Pay in Britain: A Little Bit of Evidence," Economic Journal, Royal Economic Society, vol. 112(477), pages F107-F118, February. [Downloadable!] (restricted)
  3. Richard Disney & Amanda Gosling, 1998. "Does it pay to work in the public sector?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 347-374, November. [Downloadable!]
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This page was last updated on 2009-11-27.

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